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Homework answers / question archive / Dr Emmett Brown Inc
Dr Emmett Brown Inc. has decided to acquire a time machine (instead of building another one). The details on this purchase follow. Cost of time machine Expected useful life of time machine (in years) Salvage value at end of useful life 80,000 3 19,000 $ Dr. Brown has two options on how to finance the time machine. Chili Palmer has agreed to advance funds for the entire purchase price, with the loan being payable in equal instalments at the end of each year over the five years. The interest rate on this loan would be 8.0% As an alternative, the machine could be leased over its useful life from the manufacturer with equal annual lease payments payable at the beginning of each year Annual lease payment 13,000 Additional information is as follows: Dr. Emmett Brown inc's tax rate CCA rate for time travel machines Annual maintenance costs (if Dr. Brown owns the machine) 25% 30% 2.500 $ Should the machine be leased or purchased? Show all calculations
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